Adding value through outsourcing

Abstract

PurposeThe aim of this research is to understand how customers perceive their logistics service providers in terms of achieving the claimed benefits of outsourcing. This paper is based on research focusing on the state of the 3PL (Third Party Logistics) industry in Australia.Design/methodology/approachA set of typical business outcomes to which logistics outsourcing is expected to contribute were identified. Customers were asked to rate the contribution of their principal 3PL to these performance indicators. We used competitive priorities of 3PLs, the services provided by them and technologies used by them as predictors and performed regression analysis for each of these.FindingsThe results indicate that customers of 3PLs place significant value on the services they provide, technologies they use and objectives that transcend just low cost. The implication of this final finding shows that customers see a focus on service based solutions as providing a set of benefits beyond mere cost control.Research limitations/implicationsThe main limitation of this paper is that it is confined to Australia. So, any extensions of the findings to other regions of the world should be done with caution.Practical implicationsThe practical implication of the study is that it provides support for the potential for an effective set of arrangements with 3PLs to help organizations to move out of the world of pure cost based competition, and into one where they could compete on multiple dimensions.Originality/valueThis study provides evidence from customers of logistics service providers indicating that 3PLs provide them with a means for competing through greater flexibility, at the same time as enabling better‐cost management. In this sense, customers see 3PLs as providing them with a potential pathway to more innovative business models.